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Lean Startup Principles Aren’t Just for Tech Companies

In some entrepreneurial circles, failure is celebrated. It’s seen as a necessary part of business leadership — a step forward on the path to eventual success.

But business failure still hurts — a lot. It wastes millions of dollars and years of time. And its spectre keeps plenty of people from ever becoming entrepreneurs in the first place: The stakes are just too high.

That’s why a popular philosophy for the startup world today urges companies to fail as fast as possible with as low stakes as possible — over and over — in order to design a product or service that will almost certainly find a great fit in the market.

This approach, called the Lean Startup method, is centered around the idea that companies should consistently use customer feedback to dictate their product design, only adding features once paying customers prove they’re needed.

Lean Startup principles work particularly well in the tech world. Companies that develop software and apps can make on-the-fly changes to their products in what’s often referred to as “agile development.” Many of today’s most prominent social media and sharing platforms (such as Facebook and Dropbox) started with minimal versions, then continually adapted over time.

However, lean startup principles aren’t just for tech companies. Companies of all industries and ages can learn something from these techniques.

These methods aren’t only for companies selling physical products, either. Learn more in this download: Lean Techniques for Service-Based Companies.

Intro to Lean Startup Principles

The Lean Startup philosophy took the entrepreneurial world by storm in 2011, when Eric Ries published the popular book of the same name.

Steve Blank, one of Ries’ mentors, explained how the philosophy has turned what used to be the standard operating procedure for startups its head: Traditionally, entrepreneurs started with a detailed business plan, stealthily poured money into the idea away from the eyes of competitors, and finally launched a full-featured, robust product to the market.

By contrast, the lean startup method emphasizes getting out into the market as early as possible and gaining knowledge that will improve your product quickly.

Of course, there are plenty of ins and outs to the full methodology, but the heart of the method consists of three-phase cycle: build, measure, learn.

Build

After asking ideal clients about what they want in an ideal product, entrepreneurs should build the simplest viable model of that product as quickly as they can. The term “Minimum Viable Product” is now widely used to describe the result: a product that adds only enough value that your target users will start to pay for it, and will encourage them to give you feedback to improve it. In fact, creating an MVP doesn’t always require designing an actual product; sometimes just a detailed description of the future product (such as on a landing page or a Kickstarter page) is enough to get pre-payments and lots of feedback.

Measure

Talk to users (or potential users) about what they like about the MVP, what they don’t like, what else they need, and what else they’d pay for. Get deep insights into their pain points to understand how to better fix their problems.

Learn

Change your Minimum Viable Product based on the feedback you received. (In lean startup terms, small adjustments are called “incrementals” and big changes are called “pivots.”)

Entrepreneurs can repeat this cycle indefinitely, continually improving their product and keeping it fresh for the market, even after they’re technically out of startup mode.

Non-Tech Examples of the Lean Startup Technique

Most of the more prominent examples of lean startups are companies with web-based apps or online products. But there’s no reason that other companies can’t use the same ideas for their own companies.

Here are a few examples of companies that started using lean concepts (even if the labels weren’t around at the time) for transportation, retail and engineering.

Virgin Airlines and Southwest Airlines

In some ways, the airline business model is about as far as from “lean” as it’s possible to get. With a “minimum viable product” no simpler than an entire airplane and tons of legal regulations to deal with, there’s a high barrier to entry.

However, as far as airlines go, a few have taken a decidedly lean path: In particular, Virgin Air started with just one plane. In fact, according to Virgin’s web site, founder Richard Branson’s first, unplanned foray into the airline business happened after one of his flights was unexpectedly cancelled. Branson decided to personally charter a plane to replace the flight and sold tickets to other passengers from the cancelled plane on the spot.

After that, Branson decided that there was a demand for an airline that cared about its passengers. Then, as their web site notes, there was “a phone call to Boeing to find out if they had any 747s for sale and an airline was born.”

According to this New York Times article, Virgin America began operations in August 2007 with flights between three cities: San Francisco, Los Angeles and New York.

Southwest Airlines had a somewhat similar lean beginning several decades prior. It started flying exclusively in Texas, linking Houston, Dallas and San Antonio with just four planes 1971. According to this Fortune profile, the airline was successful in part because it chartered a unique route and “squeezed more flights a day from every plane.”

Each airline worked to validate demand on a smaller scale before committing to growing its fleet and services.

Zappos

Most people are familiar with Zappos, the popular, customer-service-focused online purveyor of shoes and apparel. Zappos was purchased by Amazon in 2009 for $1.2 billion. However, the company had some very simple, lean-startup-style beginnings in 1999.

Founder Nick Swinmurn could have started his experiment by stocking inventory or paying to build a robust backend for his online store for his site. Instead, he simply got permission to take photos of shoes at local shoe stores, then posted the photos on his site. When a sale came in, he would physically go back to the store and buy the shoe, then ship it to the customer himself. He handled the payments and any refunds manually and personally.

“I went to Footwear Etc. in Sunnyvale [Calif.] and said, ‘I’ll take some pictures, put your shoes online, and if people buy them, I’ll buy them from you at full price.’ The store said okay, and I got a few orders. Then I went to a shoe show and thought, I need to put this giant collection online.”

Lean methods also work when you’re selling services instead of physical products. Learn more in this download: Lean Techniques for Service-Based Companies.

This may not have been a sustainable model for growth, but it certainly validated the demand for an online shoe store, which was very necessary in a world in a world accustomed to buying shoes in-person.

Blue River Technology

But according to Steve Blank’s Harvard Business Review piece, founders Jorge Heraud and Lee Redden didn’t start out interested in agriculture. They wanted to create robotic lawn mowers for commercial spaces. He describes what happened next:

“After talking to over 100 customers in 10 weeks, they learned their initial customer target—golf courses—didn’t value their solution. But then they began to talk to farmers and found a huge demand for an automated way to kill weeds without chemicals. Filling it became their new product focus, and within 10 weeks Blue River had built and tested a prototype. Nine months later the start-up had obtained more than $3 million in venture funding.”

By choosing to do the research upfront and by being willing to pivot early on, these founders applied their time and energy in a better direction that lead to big success.

Starting lean won’t be just right for every company. Many argue that certain types of companies simply always require huge upfront investments and leaps of faith. Plus, “lean” isn’t always easy to define, and it’s easier said than done to stick to the method — especially over time.

But it’s a mistake to assume that only new tech companies can benefit from lean principles. Market feedback is essential to success, as is getting accustomed to making changes to your business.

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